2009 Nov Ontario Tax Regulations

As you know, in 2009 the Ontario Provincial Government has enacted some interesting regulations that will impact taxpayers this year and moving forward. Various regulations amended Ontario Regulations 282/98 (an Assessment Act regulation), 73/03 (a Municipal Act regulation) and 121/07 (a City of Toronto Act regulation) as follows.

Phase-In Issues

As most people are aware, there is now a 4 year phase-in for Ontario properties which have experienced an increase in value due to the 2009 reassessment. For those properties which have experienced a decrease in value, the assessment decrease is implemented immediately and not phased in. If there is a major change in the property (such as a new building constructed on vacant land) within the 2009-2012 phase-in period, a factor called the Municipal Discount Factor will be used to determine the notional assessment (2005 CVA) and starting point for the phase in. If there is a small change to an existing property, such as an addition or renovation, a Property Specific Discount Factor will be applied to the value of the property post improvement. If either the 2005 CVA value or the 2008 CVA change due to an assessment appeal, then the starting point or ending point for the assessment phase-in must “reset” each time. When determining the results of any actions pertaining to your property, it is important to understand the impact of the phase in calculations and how they can affect the final taxes for the property.

Business Tax Capping – Municipal Exclusion Options

Municipalities now have options which allow them to move properties out of the business tax capping program. There are 3 options, which must be selected on an annual basis and can apply to all or just some, business property classes. Firstly, if the property is taxed at CVA level taxes in the previous tax year, the municipality can choose to remove the property from the business tax capping program in the current year. Almost all Ontario municipalities have adopted this option for 2009. The second option applies if the property was formerly capped, but is now in clawback position – municipalities can choose to remove the property from the program. The third option applies if the property was formerly being clawed back and is now capped – municipalities can also choose to remove the property from the program. While many municipalities adopted the second and third exclusion options for 2009, there are notable exceptions. It is important to remember that these options are annual decisions by the municipality, the options must be adopted by bylaw, and the options can apply to all business property classes or specific classes as identified by the municipality. If you want to know which options were selected for the properties you own, and how this will impact your property taxes, please give us a call.

Business Education Tax for New Construction

For any new construction built after March 22, 2007, there may be a reduced education tax rate applied to the property, which is different and lower than the education rate used for other properties in the municipality. For 2007 and 2008, there is the requirement that the education tax rate for new construction be 1.6%. For 2009 this rate was lowered to 1.52%. The Municipal Property Assessment Corporation must apply the appropriate property tax classification to the new property so that the municipality can apply the correct education tax rate. If you have newly constructed property, and want to find out if the reduced education tax rates apply to you, please contact us.